Business Tips: How to Improve Demand Planning

Introduction

The recent turmoil in the worldwide steel industry has proven to be a challenge to today's demand planners in this industry. Foreign imports, poor market conditions, bankruptcies, voluntary and involuntary closings, and other factors have all combined to make the market a volatile area to be involved in. United States Steel's Tubular Products Division (USS Tubular) is no stranger to these problems. While bankruptcies have not had a significant impact on the tubular products market (steel pipe), foreign imports have made an impact. For USS Tubular, the order books have slowly started a recovery. Not very long ago though, these order books were unpredictable. One month the books would be 80% full, the next month the order books were only 30% full. When the order books are only 30% full, many sizes and grade of pipe will be produced in a small amount of time. In turn, this increased variability plays havoc with the scheduling of the mills and the ability of the plants to order the raw materials necessary to produce the pipe. An order for the raw materials (the solid steel rounds produced by a steel mill), usually takes about three weeks to order, be produced, and be received at the pipe mill.

Current Planning Techniques

In the past, demand planning was conducted using industry experience, historical orders, current bookings, and current projected demands. These factors combined to let the demand planners schedule the pipe mills with some accuracy and allowed them to minimize the impact of material changes.

Historical orders were used to estimate orders that would be coming in. The pipe industry is pretty steady over time for certain types of pipe for certain times of the year. The demand usually follows a cycle that coincides to the oil and gas industries. During their drilling busy season, the demand for pipe usually increases. As the drilling season tapers off, the demand usually follows as well.